United States District Court, W.D. Louisiana, Lafayette Division
DENNIS R. SPURGEON
CALVIN J. LELEUX, ET AL.
PATRICK J. HANNA, MAG. JUDGE.
A. DOUGHTY, UNITED STATES DISTRICT.
a breach of contract case brought by Plaintiff Dennis R.
Spurgeon (“Spurgeon”) against Defendants Calvin
J. LeLeux; Swift Group, LLC; ICS Nett, Inc.; Jeffrey LeLeux;
Shehraze Shah; Khurram Shah; Swiftships Shipbuilders, LLC;
Swiftships, LLC; and Swiftships Group, Inc.
matter came for trial before the Court on November 5 and 6,
Court hereby enters the following findings of fact and
conclusions of law. To the extent that any finding of fact
constitutes a conclusion of law, the Court hereby adopts it
as such, and to the extent that any conclusion of law
constitutes a finding of fact, the Court hereby adopts it as
1985, Spurgeon and others purchased a boat building company
known as “Swiftships” located in Morgan City,
Louisiana. In July 1999, the company was reorganized into
Swift Group, LLC, a Louisiana limited liability company,
which became the holding company and Swiftships
Shipbuilders, LLC, also a Louisiana limited liability
company, which became the operating company. The
holding company, which owned 100% of the operating company,
was owned 40% by Spurgeon, 40% by Bob Ness
(“Ness”) and 20% by Calvin LeLeux. Land holdings
were placed in separate companies also owned 100% by the
The BLX Loan
operating company, Swiftships Shipbuilders, LLC, manufactured
military patrol boats for the U.S. Navy and other countries,
and supply boats and crew boats for the oil and gas industry.
In June 2000, the owners determined that the facilities
needed to be upgraded. A loan in the amount of $5 million was
obtained from BLC Commercial Capital (subsequently BLX). Each
member of the company, including Spurgeon, was required to
personally guarantee the loan up to the percentage of their
ownership. Accordingly, Spurgeon signed a personal guarantee
in the amount of 40% of the total loan amount.
commitment letter signed prior to the loan agreement, it was
agreed that any guarantor who sold his interest in Swift
Group, LLC, would be released as a guarantor. Additionally,
the letter provided that any entity purchasing more than 20%
interest in the company would be required to guaranty the
loan up to that entity's percentage ownership.
Sale of Spurgeon's Interest
September 20, 2002, an agreement was executed whereby
Spurgeon sold his 40% interest in Swift Group, LLC, to the
remaining members, Ness and Calvin LeLeux. By virtue of this
sale, Ness and Calvin LeLeux were to each own a 50% interest.
The consideration to be paid Spurgeon for the sale of his
interest was to come from the liquidation of the
company's boatyards in Mississippi and Texas.
Specifically, Spurgeon was to get one-third (1/3) of the
proceeds from those two sales.
Spurgeon Learns of Default of Sale Agreement
2007, Spurgeon learned that the Mississippi property had been
sold in 2004. He contacted Calvin LeLeux to ask why he had
not been paid his one-third (1/3). Calvin LeLeux sent
Spurgeon an accounting of the sale of the Mississippi
property on April 2, 2007. In that accounting, Calvin LeLeux
acknowledged that Swiftships Shipbuilders, LLC, was indebted
to Spurgeon in accordance with the sale agreement in the
amount of $550, 000 which represented the portion of the sale
of the Mississippi property that should have been paid to
Spurgeon in 2004. Calvin LeLeux assured Spurgeon that he had
a plan in place to take care of the indebtedness.
Default of BLX Loan
December 15, 2008, BLX filed suit on the outstanding note.
Spurgeon was not advised that the suit had been filed, nor
was he served with the lawsuit. Unbeknownst to Spurgeon, and
without his consent, Faisal Gill, counsel for Swift Group,
LLC, and its subsidiaries, filed a formal response on behalf
of Spurgeon to the BLX litigation on March 30, 2009.
is a graduate of the United States Naval Academy with a dual
major in marine engineering and nuclear science, and holds
two graduate degrees from the Massachusetts Institute of
Technology in nuclear energy. He was nominated and confirmed
by the Senate to be the Assistant Secretary for Nuclear
Energy in the George W. Bush administration. He learned he
had been sued by accident while Googling his own name in
preparation for giving talks after he had left the Bush
administration. Upon learning of the lawsuit, he contacted
Calvin LeLeux to find out what was going on. Calvin LeLeux
assured Spurgeon that he would take care of it.
was subsequently asked to agree to a forbearance agreement
and to a consent judgment in favor of BLX. Spurgeon
ultimately agreed that a consent judgment could be entered
against him personally if he was given an
“iron-clad” hold harmless agreement by the
Swiftships related entities. On December 1, 2010, a Release
and Indemnity Agreement was executed in favor of Spurgeon by
Swift Group, LLC; Swiftships Shipbuilders, LLC; Swiftships
Technology, LLC; Land & Industrial Asset Management, LLC;
and Champion Shipyard, “as well as their
representatives, agents, employees, servants, officers,
directors, stockholders, members, insureds, insurers,
successors, assigns, parents, subsidiaries, affiliates,
attorneys and all other persons, firms or corporations in
privity therewith . . . .” [See Exhibit 5, Release
& Indemnity Agreement dated December 1, 2010]. Faisal
Gill executed the document on behalf of the named parties and
affixed an affidavit wherein he attested that he had been
authorized to execute the document on behalf of the parties
as counsel. A consent judgment was entered in favor of BLX
and against Spurgeon, Calvin LeLeux, and the
LeLeux Takes On Lutfe Hassan d/b/a Apex Worldwide as
this period, press releases and publicly available
information indicated that Swiftships Shipbuilders, LLC, had
been awarded approximately $400 million in U.S. Navy
shipbuilding contracts. In 2008, 51% of Swift Group, LLC,
including Ness's 50% interest, was purchased by Apex
Worldwide Consulting (“Apex”), with Calvin LeLeux
retaining a 49% interest. On August 19, 2009, Calvin LeLeux
transferred an additional 10% of his membership interest to
Apex, resulting in Apex owning a 61% interest and Calvin
LeLeux owning a 39% interest.
sole owner of Apex was Lutfi Hassan (“Hassan”).
An audit prepared by Price, Waterhouse, Cooper, C.P.A.s,
completed on November 11, 2011, revealed that Hassan, acting
through Apex, had moved $30 million cash from Swiftships
Shipbuilders, LLC, to a related company in Dubai, known as
Swiftships Development, LLC. At trial, Calvin LeLeux
described this transfer as “shameful” but
asserted he was powerless to prevent it, as a minority
stockholder. However, he admitted Swiftships Development,
LLC, was also owned in part by himself. According to Calvin
LeLeux, based on this transfer of funds, and other financial
problems caused by Hassan, the U.S. Navy wanted Hassan out of
the company. As Hassan was moved out, Calvin LeLeux acquired
100% of Swift Group, LLC, by December of 2011.
The Settlement Agreement and Its Breach
after learning of the $400 million in Navy ship-building
contracts, Spurgeon became concerned as to why he had not
been paid the money owed to him. In May of 2011, Spurgeon;
Calvin LeLeux; Swift Group, LLC; Swiftships Shipbuilders,
LLC; Swiftships Freeport, Inc; and Champion Shipyards, Inc.,
entered into a settlement agreement with reference to the
consideration that was supposed to have been paid to Spurgeon
as a result of the sale of his ownership interest in the
company back in 2002, in addition to other undisputed monies
to the settlement agreement, Spurgeon was allowed to cash a
check dated March 18, 2011, made payable to him in the amount
of $308, 993.97. It was further agreed that Spurgeon would be
paid $200, 000 on July 5, 2011; $300, 000 on August 5, 2011;
$500, 000 on September 5, 2011; plus a minimum of $600, 000
for his interest in the Texas property.
cashed the check for $308, 993.97 and did receive and cash a
check for $200, 000 on or about July 5, 2011. However, it is
undisputed that the remaining $1.4 million that is owed
Spurgeon under the agreement has not been paid.
settlement agreement contains a provision that permits
Spurgeon to regain 40% interest in Swift Group, LLC, if the
contract is breached.
October 11, 2011, Spurgeon instituted this litigation against
Swift Group, LLC, and Calvin LeLeux for breach of the
contract. Spurgeon requested that the transfer of his 40%
membership interest in Swift Group, LLC, be dissolved, that
the defendants be ordered to deliver a 40% membership
interest in Swift Group, LLC, back to him, and that he be
December 6, 2011, Spurgeon filed a motion for judgment on the
pleadings. In response, on January 9, 2012, Calvin LeLeux
filed an opposition stating that he no longer owned any
interest in Swift Group, LLC, and, therefore, the return of
Spurgeon's 40% interest was an unavailable remedy. Based
in part on that representation, the Court denied the motion.
testimony at trial, Calvin LeLeux admitted that his
representation that he no longer owned any interest at the
time of the motion for judgment on the pleadings was not
true, that he actually owned 100% of the company then, and
that he had been negotiating an agreement for a new partner,
ICS Marine, which, at the time, was a parts supplier to
Swiftships Shipbuilders, LLC.
Purchase by ICS Marine
agreement was reached whereby ICS Marine purchased 50%
ownership of Swift Group, LLC, in exchange for a waiver of
$14 million owed by Swiftships Shipbuilders, LLC, to ICS
Marine in accounts receivable, and a $4 million equity
Marine was owned by Khurram Shah, who asked his twin brother,
Shehraze Shah, to handle the transaction whereby ICS Marine
would acquire 50% interest in Swift Group, LLC. ICS Marine
became a 50% owner in 2012, purchasing the 50% interest from
Calvin LeLeux, who was the 100% owner.
The Asset Purchase Agreements
January 1, 2014, there was a complete corporate restructure
of the Swiftships-related companies.
The Asset Purchase Agreement Between the Old Operating
Company and the New Operating Company
Shipbuilders, LLC, the old operating company, entered into an
Asset Purchase Agreement with Swiftships, LLC, the new
operating company, dated January 1, 2014. Swiftships, LLC, is
a Virginia limited liability company which was actually
created on January 2, 2014, a day after this Asset Purchase
Agreement became effective. This agreement purported to
transfer all of the assets of Swiftships Shipbuilders, LLC,
to Swiftships, LLC. The agreement indicated that Swiftships,
LLC was acquiring approximately $30 million in assets in
exchange for assuming approximately $30 million in
liabilities. However, no cash changed hands, and the debts
purportedly assumed included almost $28 million in future
costs to be acquired to complete the existing ship-building
contracts, which would be reimbursed by the Navy.
the new operating company acquired all of the
assets of the old operating company, the agreement
stated that the new operating company was assuming only
some of the liabilities of the old
operating company, including those debts that were necessary
to continue the outstanding contracts. The debt owed Spurgeon
was not listed as one being assumed by the new
operating company. Although the Defendants indicate that the
BLX debt was assumed, that debt is not listed in the
operations of the old operating company, Swiftships
Shipbuilders, LLC, continued after the agreement, through the
new operating company, Swiftships, LLC. The boat building
continued at the same location, with the same telephone
number, the same website, using the ...